China Ex-Post Evaluation of Japanese ODA Loan Suzhou Water Environmental Improvement Project External Evaluator: Kenji Momota, IC Net Limited 0. Summary The improvement of water quality for Suzhou City, with its extensive network of waterways, had been a major public environmental issue requiring prompt attention. Since the completion of the project, the sewage treatment plant has been operating smoothly, achieving remarkable outcomes including a more than 50% improvement in the quality of water in the city’s waterways. The objective of the project can generally be described as having been achieved, as evidenced by the opinion of many city residents who acknowledged the improvement in water quality, as well as by the healthy growth of the city’s tourism industry. The Suzhou City government places a high political priority on water resources; hence, no problems are anticipated in terms of the technical and financial sustainability of the project. In the future, it will be necessary to convert the sludge treatment method from that of the currently employed landfill method to one of incineration or other more advanced technologies. In the light of the above, this project can be evaluated as highly satisfactory. 1. Project Description RUSSIAN FEDERATION KAZAKHSTAN MONGOLIA Chanchung Beijing CHINA Shanghai Project Site INDIA MYANMER Project Location Fuxin Treatment Plant 1.1 Background The Province of Jiangsu in southern China comprises Shanghai and other large cities, and as of 1997 ranked second in economic size. The city of Suzhou, located in the south of the province, has the status of a major city; it is enjoying growth as a tourist destination with its many World Heritage sites in addition to its importance as an industrial city. Suzhou is also known for its abundant water resources: it is surrounded by numerous lakes, large and small, as well as by the Beijing-Hangzhou Grand Canal, and within the city there is an extensive network of waterways. As much as 43% of the city’s surface area is water. 1 The rapid growth in Suzhou’s economy and population since the 1980s increased the amount of sewage and industrial effluent. However, the treatment facilities were poor in both coverage and efficiency. A large portion of the wastewater was discharged to the city’s waterways without proper treatment to meet the national quality standards, thus aggravating the problem of water pollution. Furthermore, the 1992 diversion work of the Beijing-Hangzhou Grand Canal and other measures reduced the volume of water flowing into the city waterways. Accordingly, the natural purification capacity decreased and water pollution became more serious. The quality of water in the city’s waterways failed to meet even the Classs V water quality level, which is the lowest rank in China’s national water quality standards. Fig. 1 A Waterway Before the Project Fig. 2 A Highly Eutrophic1 Waterway 1 Eutrophication refers to the phenomenon of lakes and other closed water areas receiving an inflow of nitrogenous compounds, phosphates and other nutritious salts from the basin over a long period of time and transforming into nutrient-rich lakes with high rates of biological production. In an eutrophic lake, toxic substances such as algae and the like proliferate; they consume much of the oxygen in the water, leaving the lake poor in oxygen and killing aquatic life. The water quality deteriorates, the clarity decreases, bad odors are released, and the color turns green, brown, or red brown. 2 1.2 Project Outline The objective of this project is to improve the water quality of rivers in the city of Suzhou, Jiangsu Province, by constructing a sewage treatment plant and sewer systems to increase the sewage treatment capacity, and thereby contribute to an improved living environment for citizens. Loan Approved Amount/ 6,261 million yen / 6,261 million yen Disbursed Amount Exchange of Notes Date/ Loan March 2000 / March 2000 Agreement Signing Date Terms and Conditions Interest Rate: 0.75% Repayment Period: 40 years (Grace Period of 10 years) Conditions for Procurement: Bilateral; tied Borrower / Executing Agencies People’s Republic of China/Suzhou People’s Government, Suzhou Qingyuan Construction & Development Company Final Disbursement Date July 2007 Main Contractor Sainty International Group Jiangsu Machinery I/E Corp Ltd. (People’s Republic of China) Main Consultant Feasibility Studies, etc. “Feasibility Study on Water Environment Comprehensive Improvement Project in the Urban Area of Suzhou” (Suzhou CIECC Engineering Consulting Co., Ltd. / Suzhou Qingyuan Construction & Development Company, 1998) Related Projects (if any) “China–Tai Basin Urban Environment Project” (World Bank, 2004) 3 waterway Loujiang Plant Center of the City Fuxing Plant Taifu Monitoring point Figure 3 Suzhou City Zone and Project Sites 2. Outline of the Evaluation Study 2.1 External Evaluator Kenji Momota, IC Net Limited 2.2 Duration of the Evaluation Study For the purpose of this ex-post evaluation, studies were made in the following periods: Duration of the Study: November 2010 – November 2011 Duration of the Field Study: February 26, 2011– March 9, 2011 and June 4, 2011–June 11, 2011 2.3 Constraints during the Evaluation Study None of significance 4 3. Results of the Evaluation (Overall Rating: A2) 3.1 Relevance (Rating: ③3) 3.1.1 Relevance to the Development Policy of China (1) Development policy at the time of project appraisal Since the 1980s, China’s rapid industrialization and urbanization have increased the urgent demand for potable and industrial water. This situation aggravated the problem of water quality deterioration. As a result, the Chinese government made the improvement of environmental water quality a high, long-term priority that became part of its basic policy. The national environmental standards, including those of water quality, have been tightened a number of times. With respect to lakes, in particular, the problem was serious in the Three Lakes (Lake Tai, Lake Chao, and Dian Chi). The most important policy item identified in the Ninth Five-Year Plan (1996–2000) was the improvements of urban sewer systems, along with the tightened control of industrial effluents, to control wastewater inflow into rivers and lakes in order to secure safe water sources. Table 1 Water Quality Improvement Targets in Suzhou Targets By 2000 By 2010 Beijing-Hangzhou Grand Canal and waterways Class IV - V Class IV Potable water source Class 1 protected zone Class II Class II Lake Tai, Yangcheng Lake, other rivers and lakes By district n.a. In pursuit of these targets, the Province of Jiangsu established the Jiangsu Province Lake Tai Water Pollution Control Ordinance in 1996, which provided for the formulation and implementation of a plan to improve sewer treatment facilities and for ordinances to protect waterways. (2) Development policy at the time of ex-post evaluation The Eleventh Five-Year Plan (2006–2010) set out a policy to strengthen environmental protection measures, calling for the implementation of ten major environmental protection projects. Of these, water quality improvements were given a high priority. Thus urban sewage treatment was considered crucial, hence, the specific target of treating 70% of sewers nationally. The Suzhou Municipal City Government recognized that improvements to the water resource environment of the city were vitally important, because it is closely linked to the city’s socioeconomic life. Accordingly, it promotes investment plans on a continual basis. The “City Total Development Plan (1996–2010)” of Suzhou City, which may be regarded as the city’s urban planning master plan, cites improvements and conservation of the water environment as a major objective. Specific water resource environment improvement plans are implemented in accordance with the long-term plan, the “Suzhou Municipal City Urban Water Environment 2 A: Highly satisfactory; B: Satisfactory; C: Partially satisfactory; D: Unsatisfactory 3 ③: High; ②: Fair; ①: Low 5 Improvement Plan (2007–2020).” Capital investment projects, for which the total cumulative expenditure will amount to 836 million Yuna (approximately 10.8 billion yen), are planned for the modernization of existing facilities, the extension of the sewer network, and the improvement of river channels. Options for fund raising have been explored, including the BOT scheme4 and other private investments. In line with the above policy, the Suzhou Qingyuan Construction & Development General Company, which is the executing agency of this project, will be involved in the extension and upgrading of the treatment plant (Phase II Project), and in river improvement and conduit projects on a continual basis, even after the completion of the project. By way of background, an interview with the president5 of the executing agency confirmed that the project under evaluation was critical in encouraging and facilitating investment in these subsequent projects. The project under evaluation has triggered the need for this series of sewage treatment projects up to the present.6 3.1.2 Relevance to the Development Needs of China Suzhou, while important as a major industrial city in Jiangsu Province, is famous also as a tourist destination7 with a 2,500-year history. The rivers and canals that run through the city have themselves been an important element of this scenic beauty. At the time of planning the project, Suzhou had insufficient wastewater treatment capacity to cover the increasing discharge of household sewerage and industrial effluents caused by rapid economic growth and population increase. Pollutant removal measures were inefficient and even the treated water often did not meet its standards. In addition, the canal diversion work carried out during the 1990s roughly halved the flow rate of waterways in the city; in particular, the volume of Lake Tai water that was of relatively good quality decreased, thus exacerbating the problem of poor water quality. As a result, the quality of water in the city’s waterways failed to reach even the lowest national standard (Grade V), requiring urgent attention in terms of both improvements to the living environment and protection of the scenic beauty.